U.S. Ninth Circuit Upholds $2.7 Million in Sanctions Against Goodyear and Its Attorneys for Discovery Abuses Uncovered After Settlement and “History of Engaging in Serious Discovery Misconduct” in G159 Cases

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In June 2003, the plaintiffs were seriously injured when one of the Goodyear G159 tires on the front of their motor home failed, causing their vehicle to swerve off the road and overturn. They filed suit against Goodyear in 2005 in Arizona state court. The case was quickly removed to federal court. Goodyear was represented by Basile J. Musnuff, who served as Goodyear’s “national coordinating counsel” on all G159 cases, and Graeme Hancock, who served as Goodyear’s local counsel in Arizona. Musnuff and Goodyear’s in-house counsel, Deborah Okey, were responsible for reviewing and approving all discovery responses in the case. Before releasing its G159 tire, Goodyear performed FMVSS119 Department of Transportation tests, electronic post-production W84 high speed test data, L04 heat rise test results, DOT endurance tests, crown durability tests, and bead durability tests on the tire. Throughout discovery, the plaintiffs repeatedly sought the results of Goodyear’s tests on the G159 tire. However, Goodyear, Musnuff, and Hancock failed to search for and/or withheld these relevant and responsive G159 testing documents in violation of their discovery obligations to produce requested relevant documents, and to supplement prior disclosures. Because the fraud and deceit practiced on the district court and the plaintiffs was not discovered until after the underlying litigation had been closed and Plaintiffs had settled with Goodyear based upon the incomplete information provided by the sanctionees, the district court imposed the sanctions in reliance upon its inherent power, and not under Federal Rule of Civil Procedure 11, Rule 37, or 28 U.S.C. §1927.

In its sanctions order, the district court reviewed Goodyear’s discovery responses in certain other G159 tire failure actions against Goodyear in order to compare what the sanctionees knew, and when they knew it. In Woods v. Goodyear, No. CV 04–45 (Circuit Court of Hale County, Alabama), in August 2007, a Goodyear employee informed Musnuff that in addition to the High Speed tests, the tests used to determine the suitability of the G159 to be driven at 65 mph included FMVSS119 DOT tests, Heat Rise tests, bead durability tests, crown durability tests, W16 tests, W64 tests, G09 tests, and L04 tests. In Schalmo v. Goodyear, No. 512006–CA–2064–WS (Fla.Cir.Ct., 6th Cir., Pasco County), in April 2008, Musnuff and Goodyear produced the Heat Rise tests in response to a request to produce tests associated with speed rating. Musnuff wrote an email in May 2009 stating that the Schalmo plaintiffs “highlighted the Heat Rise testing taken during the durability testing of the G159.” This case ended in a plaintiff’s verdict of $5.6 million. Finally, in Bogaert v. Goodyear, No. CV 2005–051486 (Sup.Ct. of Maricopa County, Arizona), in response to an order from the court to produce testing of the G159 tire’s suitability at 65 mph, Musnuff emailed Hancock in June 2008 stating that the whole suitability testing package included: (1) the extended DOT tests, (2) the Heat Rise tests, (3) the bead durability tests, and (4) the crown durability tests. As in this case, in each of the Other G159 Cases, Goodyear engaged in lengthy discovery battles with the plaintiffs before it produced the requested documents. Woods and Bogaert were ultimately settled, but the amount of the settlements is either held under seal, or not reflected in the record of those cases. As stated above, presumably with the benefit of the Heat Rise tests, Schalmo yielded a $5.6 million verdict to the plaintiffs. The district court considered each of the sanctionees’ conduct in the other G159 cases in light of their conduct in the present case, and concluded that “Goodyear and its counsel took positions in other G159 cases directly contrary to the positions they now ask this Court to accept. The positions taken in these other cases, when Goodyear and its counsel were not attempting to avoid sanctions, are reliable.”

Addressing the authority of the court to impose the sanctions: The inherent power of the court “is not limited by overlapping statutes or rules. The Supreme Court explained ‘that the inherent power of a court can be invoked even if procedural rules exist which sanction the same conduct.’ Thus, the sanctionees’ argument that the district court should have relied on Federal Rule of Civil Produce 37 fails. While Rule 37 also provides a method to sanction a party for failing to comply with discovery rules, it is not the exclusive means for addressing the adequacy of a discovery response. The sanctionees also argue that the court cannot impose sanctions in this case because the Haegers failed to move to compel disclosure or discovery under Rule 37, and thus the sanctionees never violated a district court order compelling disclosure or discovery. More specifically, the sanctionees contend that absent such a motion to compel or order requiring production, Goodyear and its counsel complied with discovery rules, and thus the district court does not have power to sanction the sanctionees’ conduct. The Supreme Court has expressly rejected this argument. ‘Neither is a federal court forbidden to sanction bad-faith conduct by means of the inherent power simply because that conduct could also be sanctioned under the statute or the Rules … if in the informed discretion of the court, neither the statute nor the Rules are up to the task, the court may safely rely on its inherent power.’ We hold that it was not an abuse of discretion for the district court to rely on its inherent power to sanction the conduct at issue in this case, and to determine that Rule 37 did not provide the appropriate remedy, especially since the discovery fraud was not discovered until after the case had settled.”

The district court also used its inherent power to order Goodyear to file a copy of the Order in any G159 case initiated after the date of the order. “Based on Goodyear’s history of engaging in serious discovery misconduct in every G159 case brought to this Court’s attention, filing this Order in future G159 cases will alert plaintiffs and the courts that Goodyear has, in the past, not operated in good faith when litigating such cases.” The district court found that this would “serve as a notice of the existence of certain tests Goodyear attempted to conceal in previous cases.” Affirming, the Ninth Circuit said: “The district court here imposed the non-monetary sanction so that future plaintiffs and courts would be alerted that Goodyear had previously not operated in good faith, and so that future plaintiffs would be aware of the types of G159 tests available. We agree with the district court’s reasoning, particularly in light of the fact that it is highly likely that most future G159 litigation will be filed in state courts, and state court counsel will not necessarily investigate what might be contained in the Federal Reporter about the conduct of Goodyear and its counsel. We note also that the district court provided a form of safety valve in its non-monetary sanctions because ‘Goodyear may apply to the court hearing the case to be excused from [the requirements of the Order].’ We find that the district court’s imposition of non-monetary sanctions against Goodyear is balanced, is narrowly tailored, and imposes no sanctions beyond what is necessary to remedy what the district court properly perceived as an ongoing problem in Goodyear’s G159 litigation.”

Haeger v Good-year Tire & Rubber Co., 793 F.3d 1122 (9th Cir. 2015).

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